Against the backdrop of the OECD action plan against Base Erosion and Profit Shifting (BEPS), the Belgian minister of Finance has announced that transfer pricing documentation rules would be enacted in 2016. These documentation requirements would be aligned with OECD guidelines. Multinational companies should also include Belgium in the scope if they are setting up or amending their transfer pricing documentation strategy.
Belgian tax law does not have any formal transfer pricing rules. There is no mandatory disclosure of intercompany transactions in the tax return, nor is there any obligation to keep a transfer pricing documentation file. A practice note encourages corporate taxpayers to keep appropriate documentation on their intercompany transactions. At the occasion of a tax audit, the TP documentation file prepared by the taxpayer has to be accepted by the tax inspectors. TP documentation may not be binding to the tax authorities if the tax inspector can demonstrate that the factual circumstances do not match with the facts and assumptions as described in the documentation file. Tax authorities may also challenge the TP methodology used if the methods used generate a non at arm’s length outcome.
This approach is about to change. During a hearing in Belgian Parliament’s Finance Commission, the Finance Minister referred to the guidelines on documentation in the BEPS reports. It is expected that implementation of the BEPS initiatives in Belgium will result in increased efficiency of TP audits and to more legal certainty for taxpayers. Belgian government supports the introduction of documentation requirements, if these new rules are well balancing the compliance burden for enterprises with the need for more transparency in TP matters. The new documentation rules should also clearly define who has the burden of proof. The central tax authorities are currently examining the feasibility of these new documentation requirements.
We expect that the new Belgian TP documentation rules will be aligned with the OECD transfer pricing guidelines and recommendations made in the context of the BEPS initiative. Also earlier recommendations brought forward by the EU joint transfer pricing forum (i.e. an advisory body on transfer pricing matters to the EU Commission) would in all likelihood be adopted. Consequently, multinational companies already having OECD compliant TP documentation would have to make minimal efforts in order to meet the new rules. It is likely that special measures will be taken in order to minimize compliance efforts to be made by SMEs.
In the normal course of events, more information on the new documentation rules will be available later this year. The new rules would then enter into force in the course of 2016. We will publish an update in this newsletter as soon as more information is available.
Author:
Nico Demeyere (nico.demeyere@tiberghien.com)
